Funding Your Roth IRA Without a Side Hustle

I love today’s contribution to the Roth IRA Challenge. Des over at Half Banked is awesome at talking about financial basics and helping you apply the principles to your own situation. Today is a perfect example of that! The Roth IRA Challenge is all about figuring out how to earn and/or raise $5500 and make sure it goes towards the goals you want. After you learn loads and get excited to read more and do more, go check out her blog. Also, in my defense, the following conversation never happened, but I’ll let Des take it from here…

Maggie: Des, you should participate in the Roth IRA Challenge!

Des: Are you sure?! I’m not really a side-hustler – unless my sad fledgling Etsy store counts?

Maggie: Well, how much have you made from it?

Des: *checks total* Tens of dollars!

Maggie: …

A proficient side-hustler, I am not.

Would I like to be? Sure! It would be fantastic to be able to fund my savings goals through income that comes in above and beyond my regular 9-to-sometimes-past-5 job.

But if you, like me, have not found that perfect side hustle? It’s no excuse not to hit your savings goals anyways. I know, because I did it.

The Ultra-Brief Backstory

Once upon a time, I opened a budgeting spreadsheet and decided on a total whim that saving half of my income was an attainable, realistic savings goal. I turned around to my boyfriend, said “I’m going to save half my income and write about it on the internet!” and Half Banked was born.

That was in August of 2015. At that point, I was saving roughly 20% of my income, and wanted to bump it up because I had just about a zillion savings goals when I really sat down to think about it.

Emergency fund for myself? Yup, on the list. Emergency fund for my dog? Also on the list. House downpayment in two years in a not-incredibly-cheap market? Yup, write it down. Add in “Vacation and Gifts” savings, retirement savings and “Big Purchases” savings, and you’ve got my full list of savings goals.

Yikes.

That’s what really prompted me to bump up my savings rate – the knowledge that I’d never hit any of my goals on a reasonable timeline if I didn’t.

Some people start a side hustle to help bump up their savings rate, but I figured I’d attack my goal without adding to my income first, and see how it went. Luckily for me, by doing the following five things, I ended up (finally) hitting that 50% savings number in March of 2016.

So yeah, it took me a while – but it happened! And these are the five rough steps I took to get there.

Step One: Set A Goal

What would be your dream goal for your savings? Do you want to fund your Roth IRA in three months? Do you want to save $20,000 for a house down payment – in a year? Do you want to hit five savings goals simultaneously? Don’t worry about the details right now – give yourself permission to dream big. I certainly did, in large part by not really giving the details too much thought at the time.

OK, no thought. I gave the details no thought. Just go with it.

Apply it for yourself: Get out a pen and a piece of paper. Yes, this is going to be one of those exercises. I want you to write down at least one of your big, audacious savings goals, right now.

Oh, you don’t want to write it down? Alternate challenge: tweet it. Yes, to your whole list of Twitter followers. The accountability of putting it in writing – to just yourself on a piece of paper, or to the whole world of the internet – is important. Plus it makes it real, which matters.

Step Two: Track Your Spending – Or Review It

By total fluke, the first real challenge I set for myself on my way to hitting my savings goal was to track all of my spending – by hand, every day. It was rough at times, but I learned a lot from that month – including a lot of moments that went a bit like “I spent HOW MUCH ON AMAZON BOOK ORDERS?!”

The first step to fixing your Amazon book habit is admitting it to yourself, apparently. By getting more friendly with my local library, I manage to cut out about $50 of unnecessary book spending every month – aka, $600 a year.

It wasn’t just books, either. I learned a lot more about where my money was going from that month-long challenge, which has now turned into just another monthly habit to keep tabs on my spending. For instance, I’ve stopped underestimating how much I really spend on my dog every month, and I know how much I can spend on frivolous, fun things without impacting my savings goal.

Patio beers, anyone?

Apply it for yourself: If I had my way, everyone would track their spending manually, but I get that it’s not for everyone and that it’s a bit of a time commitment. Instead, you can use a tool like Personal Capital or Mint to track your spending, or you can even go back and review your monthly debit and credit card statements from last month. Separate things out into categories that makes sense for you, and tally them up.

Cue “I SPENT HOW MUCH AT STARBUCKS?!”

Step Three: Take A Look At Your Recurring Payments

This is a sub-category of spending that sometimes flies under the radar, even when you’re tracking your spending or reviewing it regularly. When I got around to reviewing the things that got paid automatically by my credit card every month, I was shocked. They ranged from out-dated subscriptions, to “I really have been meaning to cancel that” payments, to a pet insurance policy that didn’t really suit my needs.

By cancelling and adjusting those payments, I saved – no joke – over $1000 a year. That’s almost a fifth of your Roth IRA savings goal!

Apply it for yourself: Get those debit and credit card statements out, and circle every. single. thing. that came out of your account without you having to swipe or enter a pin for it. For each one, ask yourself:

• Do I still value this?
• Is there a cheaper way I can get the same results if I do still value it?

If you don’t still value it, cancel it. If you do still value it, check out cheaper or alternate options – and then get one of those, and cancel it.

Keep only the recurring payments you’d sign up for again today if you had to.

Step Four: Automate Good Times (Come On!)

Yes, to the tune of Celebration by Kool & The Gang.

As you find extra money in your budget – from tracking your spending, nixing your outdated recurring payments and looking at your budget as a whole – there’s one step that will make or break your other efforts as you’re trying to hit your savings goal.

You have to save those savings you’re finding.

It’s so easy to cancel a recurring payment for $10 or $20 a month, and funnel that money into some other spending categories without even noticing that it’s gone – or that it was ever saved in the first place. But luckily, the robots have totally got us covered on this one.

Apply it for yourself: Whenever you find those savings – from cutting your book budget to lowering the amount you spend on housing each month – set up an automatic recurring transfer from your checking account to your goal savings account.

Step Five: Go Beyond Automation When You Can

If you want to go for the bonus round, this is it. And it’s a bit of a hassle but it’s been the extra step that has helped me go beyond my automated contributions to finally hit my 50% savings goal, after six months of trying.

After you get used to new spending patterns (ahem not buying every book you see as soon as you see it, like me) you’ll start to see the wiggle room in your budget – that is, the wiggle room you haven’t already automated. After a few months, especially if you’re still tracking your spending, you’ll start to get a feel for how the month is going, and when you can afford to send an extra $50 or $100 to your savings goal.

For me, this happens mid-month, when I get paid and haven’t had any major unexpected expenses or, if we’re being totally honest, made any somewhat-unnecessary-but-fun-nonetheless purchases. In those months, I can usually tell that I have more than enough money to get me through to the end of the month, based on my usual spending patterns. Whatever I see as above and beyond that expected spending, I send straight to my savings goals.

These contributions are hard to automate, because more often than not, I’d end up pulling the money right back out to cover the kind of variable life expenses that happen some months – renewing a license plate, visiting family, you know the ones. So I do it manually, and although yes, sometimes I will need to pull a bit of that money back, it keeps me on track to focus my spending during the last two weeks of the month.

Apply it for yourself: The biggest thing you need to make this work for you is a realistic view of what your general life costs add up to on a weekly basis. I get that from tracking my spending as a whole, but a good trick to estimate it is to add up your weekend’s worth of spending at the end of every weekend.

Why weekends? That’s when I do almost all of my grocery shopping and errand-running, so it’s a good ballpark number for what I spend in a week. (If errand day is Tuesday for you, do the same for that one day.)

Once you have that, it’s pretty straightforward figure out what your baseline amount of spending is. When you get payments that go over and above covering that baseline, be aware of it and send the excess straight to your savings goals. It’ll make you think twice before pulling it out to cover wants (but make sure there’s always a way to pull it from somewhere to cover needs, if they come up.)

So what does this look like in real numbers? Let’s take the Roth IRA goal as an example, because honestly, this post strayed pretty far and I want to keep it somewhat on topic.

Once I started applying these tactics, using September 2015 as a baseline because it’s the first month I tracked my spending, I was able to save $5500 across my different savings goals in just under four months – I hit that number right before the new year, actually! That’s with no side hustle involved, just good old fashioned making sure my money went where I wanted it to go.

Ok, there was like $30-ish added to that from Etsy sales, but again – I don’t think that’s really something I’m qualified to write about as a success story. More of a charming lesson in how not to quit your job and be an Etsy star.